BlackRock/iShares - Weekly Investment Commentary: Markets Show Life While Consumers Hold Back

Weekly Commentary Overview

- Equities rebounded last week following progress in Greece , stabilization of China's market and solid company earnings in the U.S. Bonds advanced too, mostly due to another week of mixed economic figures. The data, in turn, illustrate a basic contradiction for 2015: With the U.S. economy showing signs of life, why aren't U.S. consumers spending?

- One reason is stagnant wage growth. Even if wage growth does start to accelerate, consumers are unlikely to revert to their old spending habits any time soon. The reason: The multi-decade debt binge, which supported household consumption prior to the financial crisis, has now come to an end.

- There are several implications for markets if consumers spend less: more modest growth, low for long interest rates and a household sector that comprises a relatively smaller percentage of the economy than it did at the peak in 2007.

- For equity investors, this means being selective when buying consumer stocks, given that retailers are facing a bigger battle for market and wallet share. It also requires looking at other parts of the market, such as technology stocks, that are less reliant on household consumption trends.